What is a realistic target...? - The Book-keepers Forum (UK)

NA_AA · Guru

What is a realistic target...?

BobHarper · Guru

Very much depends on your strategy in terms of target market, mix of services and business model.

For example, you could offer onsite bookkeeping at £18 an hour with no employee so your maximum would be 1,500 x £18 = £27,000. Or, you could offer a mix of bookkeeping, management accounting a business coaching and price using value pricing. With this model you could generate a much higher recovery rate and employee people to do the lower value work. This could double/treble/quadruple your profit.

In terms of the first few years, very much depends on your attitude/skill with sales/marketing/pricing. I would suggest a target of between £25,000 and £50,000 for year one.

NA_AA · Guru

Bob,

Regarding the income target of 25,000/50,000 - how many hours a week / month is this made up of?

NA_AA · Guru

And are these assumptions purely based on income generated by only providing book-keeping services?

Shamus · Forum Moderator & Expert

I think that Bobs talking about offering a service based more around management accounts than pure bookkeeping.

For bookkeeping most bookkeepers are lucky to see £15k in their first year (and many much less with a few returning nothing at all). However, if you stick with it this should improve in subsequent years.

£18 per hour is not unreasonable but you will suffer from many bookkeepers undercutting your prices. You need to somehow differentiate your service based on quality rather than price and not succumb to winning business by trying to beat those with lower overheads (such as unqualified bookkeepers without insurance, etc.).

The fixed price model that Kris and Bob both use can even things up with some clients.

Personally I have a mix of fixed and hourly pricing dependant upon the role and the required service.

The aim should be add an average of one client per month for the first six months and then to try to add a new client every week thereafter (you won't suceed but that's what you should aim for) and when you have too many clients to handle yourself to hire someone so that you are never so busy as to not be able to chase new work. Because there are so many newly qualified bookkeepers out there, one can hire some very good people whilst still retaining a good markup on using their services.

The time that you work is very much based around the size and complexity of the clients however you may very quickly find that your business takes over your every waking moment.

Assumming £18 average per hour and you work up to 60% chargeable time (don't forget a fair % of your week is spent chasing new work) based on a 48 week year then on a normal 60 hour week basis that should bring in around £31k per year. After taking out your overheads that should still leave a fair living wage.... Although if you have time to spend any of it you must be doing something wrong!

Well, that's my take on things. Sure that there are others with alternate views,

kind regards,

Shaun.

BobHarper · Guru

I am assuming you would be working full-time. On day one all your time would be marketing, then a mix of marketing and sales following by marketing. sales and delivery.

In terms of pricing there are three models; hourly, fixed and value and they produce very different results.

kjmcculloch83 · Expert

I fall firmly into fixed pricing at the moment as Shaun said. I can only tell you about my experience. I started my business while I was working full time. In year one I broke even, and in year 2 I made a small profit of about £2000. I have now left my job and spend a bit more time on my business. I'm still not doing full time hours and this year I look set to make £10,000 profit.

I'm reaching a bit of a crossroads now. Because I work round my 2 boys (3 and 4 years old), my other half works part time too and I'm doing my HNC in Accounts, I can't commit to any more hours at the moment. I don't think I have enough work to take on an employee, and because I work from home it would add a huge extra expense of office space I just can't physically do it right now. This is my plan when my boys start school in a few years. Until then I'm outsourcing the work I can't do myself. I aim for a £20-30 profit per billable hour, with overheads of about £9 per billable hour.

I don't disagree that £25,000 is doable, but I think it depends how much you have when you start your business. I started mine with a few hundred pounds, so didn't have money for a big splash. Even since then my marketing budget has been tiny. If you have £10,000 to throw at it then the year one results may be different. Like Shaun I would say that most bookkeepers make a small profit in year 1 if any at all. In my opinion this is because people generally start on a shoestring budget and are looking for a lifestyle rather than an empire.

Kris

Amanda · Expert

HI Kris,

when you say you made £10K in 2nd year do you mean after you have taken a wage thats whats left or do you mean after expenses and overheads etc that you have £10K left to pay yourself??

I'm like you at the mo, I am part-time, I work school hours and a few evenings if really busy, my boys are older than yours so I am a taxi to them in the evenings with the various activities and they go to bed alot later, so getting work done in the evenings isn't always easy!

I am about to loose 2 clients shortly so I am debating whether to get another 2 or leave it and concentrate on studying instead!

@ NA AA, I would say of you have no other committments then go for the business and heavily market yourself and then be in a position to take on someone else later and see where it takes you.

BobHarper · Guru

@Kris - I believe it is possible to win £25,000 to £50,000 from scratch with £5,000 or less.

Yes, there needs to be some money for professional design/brand, website, business cards, letterheads or you will not be taken seriously. You also need money for stamps, petrol and to pay the phone bill, but throwing money at expensive advertising is not the most effective way to win business. And, not something we'd recommend.

From reading your posts I understand you won clients with direct mail and telemarketing follow-ups...that doesn't cost a lot of money. What it does take time, energy and you need to have some balls!

The truth is most bookkeepers and accountants lack the necessary sales/marketing attitude to win what they could win. That is partly the personality profile of a bookkeeper/accountant but there are other reasons including the culture in the profession and the training.

I recommend start-ups to a resource audit before they start of time, money, knowledge, skill, creativity and attitude. The less of one you have the more of the others you'll need.

kjmcculloch83 · Expert

You're right Bob, I spend a lot of time on the phone, building list, sending letters. Eventually I realised that sending letters just wasn't getting results, but it opened the door for the phonecall. The problem was I was running out of money, all the sending letters was costing a lot and my time, so I started bull*%itting when I phoned. I would talk about the letter (that I used to send) most people really believed they had read it, or told me they had even though I never sent it to them. I learned a lot as I went along, and I'm still learning loads every day.

I'm not in bookkeeping to earn millions, but equally and, probably strangely for this field, I don't really want to do bookkeeping for a minute longer than I need to. I'd rather spend time finding new clients, dealing with them and managing the business. My life just isn't in a place where I can give the time needed to that. Right now, for me it's a lifestyle. It allows me to do something I enjoy, with the flexibility to spend loads of time with my family.

I agree with you Bob, that most bookkeepers struggle with the marketing/client acquisition aspect of the business.

Amanda, I mean that this year I will make a profit of £10,000 for me after expenses and overheads. I've just done my highest paying job so far at £50 per hour for 15 hours work, and would love to make this the standard. I am working hard right now on getting workflows right and looking at how I can be more efficient.

Kris

Amanda · Expert

I agree Bob you have to have balls and it helps if you have had some sales experience!

Like you say some bookkeepers/accountants don't come from that background and therefore struggle when it comes to selling themself. Face to face or even on the phone is always important as you leave a lasting impression!

I was 20 years in Sales before I switched and I had it drummed into me so much. Always shake someones hand with a firm hand shake. After a rep had called on us in the Sales office we always would comment after they have gone what a good or bad hand shake they had, and even now I am still the same when I shake someones hand I always think to myself, that was a 'wet lettuce leaf' hand shake they aren't very confident in themselves.

I had a builder come to look at some work once, he was recommended to us, and he shook my hand so hard I thought he was going to break some bones! I have never forgotten him and I did some work for us and was good.

I also started mine with little money, but I am lucky I am in a good area with alot of small business and I have got some through word and mouth.

BobHarper · Guru

@Kris - thanks.

I ran a telemarketing operation and probably tried every strategy and tactic in the book, and a few outside! Sending a letter before is something I suggest to a newbie because they need it.

In terms of you getting £50 an hour as standard, I'd recommend a slightly different perspective. I am sure you can do it but to get their a bit faster look at being more effective with clients rather than more efficient - if you needed an operation, would you want an efficient or effective surgeon?

kjmcculloch83 · Expert

ok Bob, you knew it was coming, but explain....

BobHarper · Guru

@Kris - it's the difference between fixed billing and value pricing. One is focussed on the job, the other is focussed on the client.

It is likely you'll need to develop your service/knowledge. You can then win the relationship on the pain of bookkeeping and then sell in a mix of bookkeeping, management accounting, accounts/tax, coaching and business advisory services. These help pull up the value because they help the client get what they want, rather than what they need.

The business model is fewer clients, higher average fees and higher margins. And, crucially, it is more marketable.

kjmcculloch83 · Expert

Ah, I see where you're going.

Kris

BobHarper · Guru

@Kris - it's where you're going that's more important! £50 an hour (and a lot more) is possible, the question is what does that mean for you at a personal level?